PPI Benefit Solutions

COVID-19 Update

Federal Updates

Biden Administration Issues Executive Order Impacting Healthcare Costs

On July 9, 2021, President Biden signed an executive order instructing various federal agencies to review their regulations and policies with an eye towards encouraging competition, including taking action to reduce healthcare costs.

In addition to other competition concerns, the order focuses on two main sources of rising healthcare costs. The first is the rising cost of prescription drugs. According to the administration, Americans pay at least 2.5 times as much for prescription drugs as peer countries. In order to check these cost increases, the order instructs the FDA to work with states and tribes to safely import prescription drugs from Canada and directs HHS to look for ways to increase support for generic drugs. It also instructs the FDA to issue a comprehensive plan within 45 days to combat high prescription drug prices and price gouging. Further, the order encourages the FTC to ban “pay for delay” and similar agreements (under which drug manufacturers pay generic drug producers to delay releasing cheaper versions of their drugs into the market) by rule.

The second source of rising healthcare costs is hospital consolidation. According to the administration, the ten largest healthcare systems now control a quarter of the market, allowing these systems to set higher prices for the services they provide. Although the previous administration instituted price transparency regulation, hospitals have been slow in complying with them, further obscuring the price increases they charge. The order instructs the FTC and the Justice Department to review and revise their merger guidelines to ensure that patients are not harmed by healthcare system mergers, and directs HHS to support existing hospital price transparency rules and to finish implementing surprise billing regulations.

Also of note is the order’s direction to HHS to propose rules within 120 days that allow hearing aids to be sold over the counter. HHS is also instructed to standardize plan options in the federal insurance marketplace so that people can comparison shop more easily.

Employers should be aware of these upcoming regulatory efforts to curb costs, which may impact healthcare plan premium rates.

Executive Order on Promoting Competition in the American Economy »
Fact Sheet »

Retirement Update

PBGC and IRS Provide Guidance on Multiemployer Plan Special Financial Assistance

On July 9, 2021, the Pension Benefit Guarantee Corporation (PBGC) issued interim final rules and assumptions on special financial assistance (SFA) for multiemployer pension plans, as provided by the American Rescue Plan Act (ARPA). The ARPA authorized PBGC to provide SFA to multiemployer pension plans that are in critical and declining or critical status, were approved to suspend benefits under the Multiemployer Pension Reform Act of 2014, or became insolvent after December 16, 2014, but have not been terminated.

The interim final rule discusses how the SFA amount will be calculated, the order in which plans will be permitted to file SFA applications, details on what must be included in applications, how the PBGC will go about reviewing SFA submissions, and the conditions that will apply to plans that receive the SFA.

In determining eligibility for and the amount of SFA, ERISA generally looks to the plan assumptions previously selected by the actuaries. However, the ARPA also allows plans to propose changes to those assumptions (except for the interest rate) if they are no longer reasonable. The PBGC provided guidance on acceptable assumption changes in PBGC SFA 21-02.

Simultaneously with the release of the interim final rules and assumptions guidance, the IRS released Notice 2021-38 to provide guidance to multiemployer plan sponsors that must reinstate certain previously suspended benefits as a condition of receiving SFA. The guidance also clarifies that make-up benefits paid to individuals as a result of the reinstatement of previously suspended benefits may be paid in a lump sum within three months of the receipt of SFA funds or in equal monthly installments over the five year period beginning three months after the receipt of SFA funds. Additionally, the SFA funds received are not taken into account if a multiemployer plan needs to make certain contributions to avoid funding deficiencies. Finally, the IRS guidance indicated that multiemployer plans with suspended benefits must submit an SFA application to the Department of the Treasury, but this requirement will be satisfied if they send the application to the PBGC.

Multiemployer plan sponsors that will seek to apply for SFA funds should familiarize themselves with this guidance and consult with their counsel and tax advisors in complying with the requirements.

Interim Final Rule »
Special Financial Assistance Assumptions »
IRS Notice 2021-38 »

Reminders

Form 5500 Filing for Calendar Year Plans Due July 31

Each year, PPI Benefit Solutions files the Annual Return/Report Form 5500 Schedule A for the ACSA and BIEB Group Insurance Trusts. This filing includes all coverages provided and administered through the Trusts, eliminating the need for Trust members to file for these coverages. Clients may be responsible for filing Form 5500 for benefits and products purchased outside of the ACSA or BIEB Trusts, as well as any employer-sponsored fringe plans such as cafeteria plans, educational assistance plans, or legal plans.

Applicable plan sponsors must file Form 5500-series returns on the last day of the seventh month after their plan year ends. As a result, calendar-year plans generally must file by July 31 of this year (reporting on the 2020 plan year). (Keep in mind, though that the actual due date will be August 2, 2021, since July 31 falls on a Saturday.) Plans may request a two-and-a-half-month extension to file by submitting Form 5558, Application for Extension of Time to File Certain Employee Plan Returns, by that plan's original due date.

As a reminder, group health plans sponsored by a governmental or church entity aren’t required to file a Form 5500, as those plans aren’t subject to ERISA. Additionally, unfunded, insured or combination unfunded and insured health plans with fewer than 100 participants on the first day of the plan year are also exempt from the filing.

Forms 5500 and Instructions »
Form 5500 EFAST2 »
Form 5558, Extension of Time »

PCOR Fee, Form 720 Filing Due July 31

The ACA imposed the PCOR fee on health plans to support clinical effectiveness research. The PCOR fee applies to plan years ending on or after October 1, 2012, and before October 1, 2029. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year. (Keep in mind, though that the actual due date will be August 2, 2021, since July 31 falls on a Saturday.)

PCOR fees are required to be reported annually on Form 720, Quarterly Federal Excise Tax Return, for the second quarter of the calendar year. Plan sponsors that are subject to PCOR fees but no other types of excise taxes should file Form 720 only for the second quarter. No filings are needed for the other quarters for such employers.

The PCOR fee is generally assessed based on the number of employees, spouses and dependents that are covered by the plan. For plan years ending in 2020 on or before October 1, 2020, the fee was $2.54 multiplied by the average number of lives covered under the plan. For plan years ending between October 1, 2020, and October 1, 2021, the fee increased to $2.66. Form 720 and corresponding instructions were revised to reflect the increased fee.

The PCOR fee can be paid electronically or mailed to the IRS with the Form 720 using a Form 720-V payment voucher. According to the IRS, the fee is tax-deductible as a business expense.

As a reminder, the insurer is responsible for filing and paying the fee for a fully insured plan. The employer plan sponsor is responsible for filing on a self-insured plan, including an HRA. A stand-alone dental or vision HRA would be excepted and wouldn’t be subject to the PCOR fee.

Form 720 »
Form 720 Instructions »

ARPA Tax Credit, Form 941 Filing Due July 31

The American Rescue Plan Act (ARPA) allows employers and insurers to claim a tax credit for the COBRA premium subsidies they pay on behalf of assistance eligible individuals (AEIs). The credit is credited against the Medicare hospital insurance tax and is fully refundable, which means that the employer or insurer claiming the credit can receive a payment from the IRS if the amount of the credit exceeds their Medicare hospital insurance tax obligations (including where they do not owe any Medicare hospital insurance tax).

Remember that employers are eligible for the tax credit if they maintain self-insured plans or their fully insured plans are subject to federal COBRA. Insurers can claim the credit if they cover plans that are subject only to state healthcare continuation laws. Note that in the event of multi-employer plans, the plan itself can claim the credit.

The employer or insurer can claim the credit for periods covered by the premium subsidy, and they are entitled to the credit as of the date the AEI elects COBRA coverage. For instance, if an AEI elects COBRA coverage on July 1, and that coverage is retroactive to April 1 (the first day of the ARPA premium subsidy period), then the employer or insurer can claim the credit for the period beginning on April 1 through July 1. If the AEI continues the COBRA coverage through July, then the employer or insurer can claim a credit for that period too.

The employer or insurer claims the credit on its quarterly employment tax return, Form 941. They may reduce deposits of federal employment taxes (including amounts withheld from employees) up to the amount of the anticipated tax credit and then report the tax credit claimed, and the number of individuals receiving the tax credit for that quarter, on the Form 941. Since the return covers the months of April, May and June, the next filing is due on July 31, 2021.

Employers and insurers can obtain an advance on the tax credit by filing Form 7200 (which can only be filed via fax); however, they are still responsible for claiming the credit on Form 941.

Form 941 »
Instructions for Form 941 »
Form 7200 »
Instructions for Form 7200 »

FAQ

If an employee is on a leave of absence, can they still contribute to a health FSA, dependent care FSA or HSA? Also, must employer HSA contributions continue during the leave period?

The handling of health FSA contributions while an employee is on a leave of absence depends upon the type of leave and the employer’s leave policies.

For FMLA leave, the employer must maintain the same group medical benefits, which include health FSA benefits, during the leave as if the employee was still working. So, the employee must be allowed to continue contributing to the health FSA for the leave period.

In such an event, arrangements should be made for the employee on FMLA leave to pay the health FSA contribution. The three options permitted are pre-payment (prior to the leave), pay-as-you-go (meaning at regular intervals during the leave, which would be post-tax for an unpaid leave) and catch-up (i.e., upon return from leave). The employer cannot offer pre-payment as the only option.

However, the employee is not required to make contributions during FMLA leave. If the employer requires the health FSA coverage to continue during the leave, the employee could cease contributions during the leave period (and then make catch-up contributions upon return). But an employer cannot require continuation of coverage during FMLA leave, unless also required for a non-FMLA leave of absence.

Alternatively, the employer could permit the employee to revoke the health FSA coverage during the leave (and be reinstated upon return). If the employee revokes the coverage, the employee is not entitled to reimbursement for health FSA claims incurred during the period the coverage was not in place.

USERRA also provides certain benefit rights for employees on a leave of absence for military service. Employees on USERRA leave must have the right to continue the health FSA coverage during the leave and are generally offered the same three payment options as those on FMLA leave (noted above). The employee may also be permitted to revoke coverage during the leave, subject to reinstatement upon return.

For other types of leave, the employer should review their cafeteria plan terms and leave policies to determine how the health FSA benefits should be addressed during the leave. These terms and policies should be clearly communicated and consistently applied to all similarly situated employees.

With respect to dependent care FSAs, an employer is not required to allow contributions to continue during the leave. The employee could be permitted to continue such contributions and, as with health FSA contributions, be offered the options of pre-payment, pay-as-you-go or catch-up contributions.

However, the employee may instead prefer to revoke or decrease the dependent care FSA contribution during the leave period because the employee will not have dependent care expenses that are eligible for reimbursement. Under IRS rules, dependent care expenses are generally only reimbursable if for the purpose of enabling the employee (or spouse) to be gainfully employed, (although there is an exception for short absences of two consecutive weeks or less). Additionally, the applicable qualifying event rules allow an employee to change a dependent care FSA election because of any change in daycare use, provider or cost. So, the employee should be made aware of the option to stop the contributions for the leave period (and make a new election upon return).

An HSA is not coverage under a group medical plan that must be continued during FMLA, USERRA or other types of leave. Rather, an HSA is a trust or custodial account owned by the employee. If permitted under the terms of the HSA program, an employee on a leave of absence may continue to contribute to the HSA, provided that the HDHP coverage is maintained during the leave period. If the leave is unpaid, the employee may prefer to cease HSA contributions for the leave period and then make a new election to resume HSA contributions upon return. Under a cafeteria plan, an employee must be permitted to change HSA elections at least monthly, for any reason.

Employers are not required to make employer HSA contributions for employees on a leave of absence, even if the leave is protected leave (such as FMLA). So, an employer may discontinue employer HSA contributions for an employee on leave (with no catch-up upon return). However, if the employer chooses to make HSA contributions for employees on non-protected leave, the contributions must be made for those on protected leave. The employer’s policy with respect to HSA contributions should be clearly defined in their leave policies and HSA program.

Accordingly, whether health FSA, dependent care FSA and HSA contributions continue during a leave period depends upon the type of leave, employer policy and, as applicable, options elected by the employee. Therefore, it is imperative that the employer’s cafeteria plan document, leave policies and other benefit materials clearly reflect how the health FSA, dependent care FSA and HSA contributions and benefits will be addressed during the leave period. This information should be clearly communicated to affected employees, so they are aware of their options and obligations for the leave period.

State Updates

Delaware

July 20, 2021

Coverage for Epinephrine Autoinjectors

On June 15, 2021, Gov. Carney signed HB 95 into law. The new law applies to policies issued or renewed after December 31, 2021. Such policies must provide coverage for medically necessary epinephrine autoinjectors for participants who are 18 years of age or under by including at least one formulation of epinephrine autoinjectors on the lowest tier of the drug formulary developed and maintained by the carrier. Epinephrine autoinjector means a single-use device used for the automatic injection of a premeasured dose of epinephrine into the human body.

Employers should understand the new coverage and work with carriers to revise and distribute the certificate of coverage to covered employees.

HB 95 »

Discrimination Prohibited Related to HIV Preventive Medication

On June 15, 2021, Gov. Carney signed HB 111 into law. Effective immediately, the new law prohibits life insurance disability policies from discriminating against an individual solely because they have been prescribed pre-exposure prophylaxis medication to prevent HIV infection. Specifically, an insurer cannot refuse to renew, refuse to issue, cancel, restrict coverage or add a premium rating factor based on such fact.

Because of privacy issues, an employer likely will not know if an employee is on such medication. However, the employer should work with insurers to make sure that policies comply and any necessary plan document amendments are made.

HB 111 »

Illinois

July 20, 2021

Chicago Expands Reasons for Paid Sick Leave

On June 25, 2021, Ordinance 02021-2182 was passed by the Chicago City Council. In addition to creating new wage theft protections, the Ordinance expands reasons for use of paid sick leave.

As background, the city requires employers to provide employees with paid sick leave to care for themselves (or a family member) if they work at least 80 hours within any 120-day period (eligible for use by the 180th day of employment). The ordinance applies to all employers with at least one covered employee.

The ordinance expands reasons for paid sick leave to include absence due to an order to quarantine or stay home to prevent spread of a communicable disease issued by the mayor, Illinois government, Chicago Department of Public Health or a healthcare provider. It also expands reasons that already exist, such that leave is permitted:

To care for family members whose school or place of care has been closed (omitting the closure to be caused by order of a public official due to a public health emergency)
If an employee or covered family member is a victim of a sex offense, which now includes stalking, aggravated stalking or cyber stalking
For the purpose of receiving diagnosis or treatment for mental or behavioral issues, including substance abuse disorders (or if a covered family member is receiving such services)

Employers with employees in Chicago should be aware of the expanded reasons for use of Chicago paid sick leave and ensure compliance with the revised paid sick leave rules effective August 1, 2021.

Ordinance 02021-2182 »

New Hampshire

July 20, 2021

New Paid Leave Program Adopted

On June 25, 2021, Gov. Sununu signed into law House Bill 2, a state budget bill that includes the Granite State Paid Family Leave Plan (among other matters). This new law requires paid family leave for state employees and provides a voluntary opt-in by both non-state employers and individual non-state employees.

The program requires payroll deductions and certain employment protections, including health insurance coverage while on leave (among other protections). In addition, there is a tax credit provided to employers who opt-in to the program and the ability for individuals whose employers choose not to opt-in (or not required to participate) to participate through an individual pool.

As an overview, the benefit provides 60% wage replacement for up to six weeks per year. The qualifying reasons for leave appear to depend on whether the individual is a state employee, employed by an employer who chose to opt-in or an individual who chose to opt-in. As with many new laws, further guidance is anticipated for clarification.

The effective date of this new law is July 1, 2021, with coverage required by January 1, 2023. Employers with employees in New Hampshire should be aware of these developments.

House Bill 2 »

Washington

July 20, 2021

Extension of Emergency Orders on COVID-19 Testing and Surprise Billing

On July 9, 2021, Commissioner Kreidler issued orders further extending emergency orders 20-01 and 20-06. Emergency Order 20-01, which has been extended through August 8, 2021, requires health insurers to waive copays and deductibles for COVID-19 testing. The order also requires insurers to allow a one-time early refill for prescription drugs.

Emergency Order 20-06, which has also been extended through August 8, 2021, protects consumers from receiving surprise bills for lab fees related to COVID-19 diagnostic testing. The order also encourages insurers to report out-of-network labs that are not publishing or honoring the cash price of COVID-19 diagnostic testing.

These orders apply to insurers but provide employers with information about the continued coverage of COVID-19 testing.

Further Extending Emergency Order 20-01 »
Further Extending Emergency Order 20-06 »

This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI^®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.

PPI in the News Compliance Corner - July 22, 2021 Archive
You are here: Home / PPI in the News / Compliance Corner - July 22, 2021 Archive

COVID-19 Update

Federal Updates

Biden Administration Issues Executive Order Impacting Healthcare Costs

Retirement Update

PBGC and IRS Provide Guidance on Multiemployer Plan Special Financial Assistance

Reminders

Form 5500 Filing for Calendar Year Plans Due July 31

PCOR Fee, Form 720 Filing Due July 31

ARPA Tax Credit, Form 941 Filing Due July 31

FAQ

If an employee is on a leave of absence, can they still contribute to a health FSA, dependent care FSA or HSA? Also, must employer HSA contributions continue during the leave period?

State Updates

Delaware

July 20, 2021

Illinois

July 20, 2021

New Hampshire

July 20, 2021

Washington

July 20, 2021

FAQ

Compliance Corner Archive

PPI in the News Compliance Corner - July 22, 2021 Archive You are here: Home / PPI in the News / Compliance Corner - July 22, 2021 Archive

COVID-19 Update

Federal Updates

Biden Administration Issues Executive Order Impacting Healthcare Costs

Retirement Update

PBGC and IRS Provide Guidance on Multiemployer Plan Special Financial Assistance

Reminders

Form 5500 Filing for Calendar Year Plans Due July 31

PCOR Fee, Form 720 Filing Due July 31

ARPA Tax Credit, Form 941 Filing Due July 31

FAQ

If an employee is on a leave of absence, can they still contribute to a health FSA, dependent care FSA or HSA? Also, must employer HSA contributions continue during the leave period?

State Updates

Delaware

July 20, 2021

Illinois

July 20, 2021

New Hampshire

July 20, 2021

Washington

July 20, 2021

FAQ

Compliance Corner Archive

PPI in the News Compliance Corner - July 22, 2021 Archive
You are here: Home / PPI in the News / Compliance Corner - July 22, 2021 Archive